Obama Calls Summers Criticism Unfair in Capitol Meeting

By Kathleen Hunter and Michael C. Bender -
Jul 31, 2013

President Barack Obama, asked about former Treasury Secretary Larry Summers as a candidate for Federal Reserve chairman, said Summers is being unfairly criticized in public debate about the selection, lawmakers said after a private meeting with the president.

In the meeting today with House Democrats, Obama also named former Fed Vice Chairman Donald Kohn and current Vice Chairman Janet Yellen as potential nominees to lead the central bank, said a Democratic aide who sought anonymity to discuss the private session.

The president “took a minute to stand up for Larry Summers,” said Representative Brad Sherman of California, following the meeting with House Democrats. Obama then met with Senate Democrats, and afterward Majority Leader Harry Reid said party members in his chamber will support the president’s choice for the Fed, “no matter who it is.”

Obama told House Democrats he hadn’t decided whom to appoint as Fed chairman -- though he said Summers was being unfairly criticized, Sherman said. People familiar with the search had previously said Summers and Yellen were the two leading contenders to replace Chairman Ben S. Bernanke, whose term expires Jan. 31.

Representative John Larson, a Connecticut Democrat, said the president was “very adamant in his defense of the service Larry Summers has provided.”

‘Very Defensive’

Representative John Lewis of Georgia said Obama “was very defensive, I would say, of Summers and saying that Summers had played a very critical role early in the administration.”

Nineteen Democratic senators and one independent -- led by Ohio Democrat Sherrod Brown -- signed a July 26 letter to the White House praising Yellen and urging the president to nominate her as Fed chairman.

White House spokesman Jay Carney said Summers “stood shoulder to shoulder” with Obama through the financial crisis and that “the president would defend that individual as I would.” He said people should “separate” Obama’s defense of Summers from speculation about whom the president will choose as the Fed chairman nominee.

Some Senate Democrats, including the No. 2 leader, Dick Durbin of Illinois, earlier had publicly questioned whether Summers should lead the Fed.

After the meeting today, Durbin reiterated to reporters that he would have “a number of questions” for Summers if he were nominated. “I’m not saying I’ll vote against him, but I’ll certainly ask a few questions,” he said.

Senators’ Skepticism

Reid, a Nevada Democrat, was asked whether he shared some other senators’ skepticism about Summers.

“I personally don’t, but some of my senators have been involved publicly in directing the president’s attention to someone else,” Reid said. “I think he’s a very competent man. But that decision is up to the president.”

Senator Jon Tester, a Montana Democrat, said Obama told lawmakers he had interviewed other “qualified” candidates.

“I can almost quote what he said,” Tester said. “He said, ‘I’ve interviewed a lot of folks who are all very qualified. Folks we’ve seen in the paper, and folks we haven’t.’”

Economic Council

Summers directed the National Economic Council under Obama and served as Treasury secretary under President Bill Clinton.

“I think he has a lot of respect for Larry Summers. I think he respects the work that he did on the financial crisis, and he didn’t want anybody standing up and casting aspersions on him,” said Representative John Yarmuth, a Kentucky Democrat.

Obama mentioned Yellen and Kohn as possible candidates in response to a question about whether he was considering nominating Summers, said a Democratic lawmaker who requested anonymity to talk about the private meeting.

Representative Ed Perlmutter, a Colorado Democrat, first brought up the Fed nominee search, telling the president, “Larry Summers? Bad idea - I’m willing to discuss,” according to Yarmuth, who said it was Perlmutter’s question that prompted Obama to give “a very forceful defense of Summers.”

A group of 37 House Democrats, led by California Representative Maxine Waters, sent a letter to the White House today urging Yellen’s appointment, saying that she has “demonstrated a unique understanding of the impact of the Federal Reserve’s policies on the middle class.”

Waters is the top Democrat on the House Financial Services Committee.

Potentially Weakened

David Gergen, an adviser to Republican and Democratic presidents from Richard Nixon to Clinton, said the public endorsement of Yellen has potentially weakened her and Summers and may prompt the president to favor a third candidate.

“Sometimes when you have these kind of spats break out, people start looking for a dark horse,” Gergen said.

Yellen, the No. 2 Fed official since 2010, would be the first female leader in the central bank’s 100-year history. She was a University of California, Berkeley, economics professor who specialized in labor-market research before serving as chairman of Clinton’s Council of Economic Advisers and president of the San Francisco Fed.

Kohn was Bernanke’s most important sideman during the financial crisis, serving as Fed vice chairman from 2006 until 2010. He became a Fed governor in August 2002, and before that had worked at the Fed since 1970.

Financial Stability

After his Fed career, Kohn took on jobs related to financial stability. He now is a member of the Bank of England’s Financial Policy Committee and is on the advisory committee of the Treasury’s Office of Financial Research.

Yarmuth said he did “not necessarily” get the sense Obama was leaning toward choosing Summers for the post.

House Democratic Leader Nancy Pelosi of California said she didn’t view the president’s comments as a “defense” of Summers. “It wasn’t really about Larry Summers,” Pelosi said. “It was about how important this decision is.”

The president’s meetings on Capitol Hill came before lawmakers recess on Aug. 2 to begin a five-week break, returning Sept. 9 with a busy schedule.

Last month, Obama said in an interview with Charlie Rose that Bernanke had stayed in the post “longer than he wanted.” The Fed chairman hasn’t indicated whether he would seek or accept a third term.

White House officials have begun to focus on how Obama will leave his mark on the central bank. An administration official, who asked not to be identified in discussing internal planning, said July 26 that Obama won’t nominate a successor until at least September.

Summers’s Role

Some Democratic senators have raised concerns about Summers’s role in advocating deregulation during the Clinton administration.

In 1998 Summers, then-Fed Chairman Alan Greenspan and Treasury Secretary Robert Rubin blocked efforts by Brooksley Born, then-chairman of the Commodity Futures Trading Commission, to regulate the derivatives market. It later expanded to include the toxic instruments that led to the 2008 financial market crisis.

Summers also sought repeal of the Glass-Steagall Act, the Depression-era law separating commercial and investment banking.